My Name is Paul H Cosentino. I started this Blog in 2011 because of what I believe to be wrongdoings in town government. This Blog is to keep the citizens of Templeton informed. It is also for the citizens of Templeton to post their comments and concerns.

Paul working for you.

Thursday, December 22, 2016

More borrowers are losing Social Security benefits over old student loans

More borrowers are losing Social Security benefits over old student loans

Over 70% of the $1.1 billion garnished from Social Security to pay student loans only applied to fees and interest.

JillianBerman

Reporter

The
typical struggling student loan borrower is often a 20-something weighed
down by six-figure debts as he or she looks to start a budding career
and adult financial life. But a new report adds to the growing body of
evidence that student debt is so widespread that it’s now a challenge
faced by Americans of all types.

About 114,000 student loan
borrowers over 50-years-old are losing out on a portion of their Social
Security benefits because of an old student loan and the number of
borrowers over age 65 facing this predicament has increased 540% over
the last decade, according to a report released Tuesday
by the Government Accountability Office, the nonpartisan investigative
arm of Congress. The government provides federal student loan borrowers
with a variety of options to avoid defaulting on their loans, but once a
borrower defaults the feds have access to incredible powers to collect
on the debt, including garnishing Social Security benefits, wages and
tax refunds.

More than 70% of the $1.1 billion collected through
Social Security benefits to pay off student loans only applied to fees
and interest —meaning that those funds likely barely made a dent toward
paying back the borrower’s debt.

The
dramatic increase in older borrowers facing these collection tactics is
likely due in large part to the growth in older Americans carrying
student loan debt; the number of borrowers over 64-years-old increased
385% since 2005, compared with an increase of 62% for borrowers between
ages 25 and 49. About three-quarters of older borrowers had taken on
loans for their own education -- not their children’s -- and those who
are carrying debt on behalf of their kids were less likely to default,
the GAO found.

The report indicates that often collections on
student loans are increasingly pushing seniors closer to the financial
edge. The government has to leave borrowers with a minimum of $750 in
Social Security benefits, but that floor was created in 1996 and hasn’t
been adjusted for changes in cost of living. In 2016, the poverty
threshold for a single adult was $990. About 67,300 borrowers have had
their benefits garnished below the poverty line, compared with 8,300 in
2004.

“This
report demonstrates just how draconian these Social Security offsets
are and how there seems to be a failure at all sorts of levels of this
policy,” said Persis Yu, the director of the Student Loan Borrower
Assistance Project at the National Consumer Law Center, a nonprofit
group based in Boston, Mass.

GAO

Seniors are increasingly pushed toward poverty because of old student debts.
More than 70% of the $1.1
billion collected through Social Security benefits to pay off student
loans only applied to fees and interest — meaning that those funds
likely barely made a dent toward paying back the borrower’s debt. More
than 50% of borrowers at least 50-years-old who are losing out on Social
Security benefits had no portion of that offset applied to their
principal. More than one-third of borrowers facing Social Security
garnishments over their loans were still in default five years after the
government began offsetting their Social Security and some even saw
their loan balances increase over the offset period, the GAO found.
Despite having their Social Security benefits taken away to
theoretically cover their student debt, about 13% of borrowers who were
at least 50-years-old when the garnishing began died with a portion of
their loans still unpaid, the report found. (Federal student loan debt
is automatically canceled and the debt is discharged when a person
dies.)

Sen.
Elizabeth Warren (D-Mass.), who requested the report from the GAO along
with Sen. Claire McCaskill (D-Mo.) called the tactics described in the
report, “predatory and counterproductive” in a statement. “The
hard-earned Social Security checks that are the sole source of income
for millions of seniors should not be siphoned off to pay interest and
fees on student loan debt,” she said. “It’s no wonder many Americans
don’t think Washington works for them: our government is shoving tens of
thousands of seniors and people with disabilities into poverty through
garnishment every year — and charging them $15 every month for the
privilege — just so that the Department of Education can collect a
little bit more interest and keep boosting the government’s student loan
profits.”

In many cases, this fate is likely avoidable, but
borrowers may not be receiving the information necessary to take action,
Yu said. The Department of Education offers borrowers the opportunity
to use repayment programs to make student debt more manageable by making
payments capped at a certain percentage of their income. But servicers,
the private companies hired by the government to collect student loan
payments, often don’t do enough to educate borrowers about their
options, consumer advocates have warned. In many cases the first time an
elderly borrower hears about their student loan in decades is when
they’re applying for Social Security, Yu said. That’s despite that about
43% of borrowers facing offset for the first time have had their loans
for 20 years or more, the GAO report found.

The Department of
Education didn’t immediately respond to a request for comment on the
report, but the agency has expressed concern about the plight of
borrowers faced with losing their Social Security retirement and
disability benefits over unpaid student loans.

In
addition, the report notes that Department identified borrowers who were
having their disability benefits offset and who would qualify for a
total and permanent disability discharge — a provision that allows
borrowers to have their loans wiped away if they’re permanently unable
to work — and alerting the borrowers that they qualified. The agency
also halted garnishment of Social Security disability benefits for
borrowers with a condition where medical improvement wasn’t expected.
Once these borrowers reach the age to claim Social Security retirement
benefits offsets will begin again unless the borrower is approved for a
total and permanent disability discharge.